The right stocks can make you rich and change your life.
The wrong stocks, though… They can do a whole lot more than just “underperform.” If only! They can eviscerate your wealth, bleeding out your hard-won profits.
They’re pure portfolio poison.
Surprisingly, not many investors want to talk about this. You certainly don’t hear about the danger in the mainstream media – until it’s too late.
That’s not to suggest they’re obscure companies – some of the “toxic stocks” I’m going to name for you are, in fact, regularly in the headlines for other reasons, often in glowing terms.
I will run down the list and give you a chance to learn the names of three companies I think everyone should own instead.
But first, if you own any or all of these “toxic stocks,” sell them today…
Boeing (BA)
At first glance at Boeing’s chart, it might appear that the share price is recovering, up 8.5% this year. But zoom out, and you will see that Boeing is still trading 42% below where it was five years ago.
Higher inflation in recent years has resulted in increased costs for Boeing, which saw its G&A expenses surge 51% in Q1. Supply chain issues also weighed on the operating margin expansion. The commercial aircraft manufacturer saw a sharp decline in operating margin from -3% in 2019 to -22% in 2020 due to the impact of the pandemic, and it has struggled to recover to -5% in 2022.
The underperforming stock has been plagued with long-term problems, and multiple high-profile crashes that the commercial aircraft manufacturer would rather put behind them haven’t inspired any confidence. Most recently, technical issues forced the company to halt deliveries of some of its marquee 737 MAX airplanes. Considering all this, we’re sticking to the sidelines for BA ahead of its Q2 2023 earnings call on Wednesday, July 26.
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Affirm Holdings Inc (AFRM)
Our following stock to avoid is Affirm Holdings, a fintech firm specializing in “buy now, pay later” services, and it faces significant hurdles. Despite an initial surge in growth facilitated by AFRM’s partnership with Peloton (PTON), there has been a struggle to sustain momentum. AFRM’s most recent quarter saw results that confirmed its lack of profitability. Also, being a consumer credit business, AFRM will likely experience mounting challenges amid a dim economic outlook.
AFRM’s stock is up year-to-date by 88%; you’ll notice a trend where, after seeing a YTD gain, you’ll see negative numbers from there on. For instance, AFRM has an ROE (return on equity) of -37.97% and a 3.65 beta, which indicates how prone the stock is to volatility. AFRM has a TTM revenue of $1.51 billion, yet it lost $965 million thanks to its -64.12% profit margin. AFRM shows negative year-over-year growth in net income (-276.21%), EPS (-263.16%), and net profit margin (-250.36%). With a 10-day average volume of roughly 24 million shares, AFRM has a median price target of $14.50, representing a loss of 15% over the next 12 months.
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Check Point Software Technologies (CHKP)
Check Point develops a range of cybersecurity products and services globally. In terms of financial performance, the company has delivered mixed results. Although it has maintained bottom-line profitability for over two decades, Check Point’s revenue growth over the past five years has settled in the low single-digit range.
CHKP shares are down 1% YTD and are only up a fraction of a percent over the past twelve months. “Amid a tech sub-vertical characterized by rapid growth, this lukewarm share performance stands out like a blemish.
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